Banking IT Spending Flat in '04

Technology spending by North American banks will remain flat for 2003, based on a recent survey of banking CIOs by Giga Information Group, a wholly owned subsidiary of Forrester Research. Allocation of IT--budget dollars for planned initiatives will concentrate on improving regulatory compliance, better risk management, and curbing needless spending increases. The new report reveals a list of detailed technology areas on which CIOs will focus. Spending for outsourced services and software will see the largest increase, while spending for consulting will decline, and hardware and network equipment spending will remain flat. Salaries and benefits are down in the United States, largely owing to reductions in workforce. Top areas of new product spending are enterprise-integration projects, followed by security and enterprise portals. Spending on knowledge management and CRM is a close third, according to the report. "This does not mean that CRM is by any means a low priority; these top-tier priorities are just very close and easily segmented," says Penny Gillespie, an analyst at Forrester and the author of the survey report. Gillespie explains that CRM spending will most likely focus on integrating customer data. "Financial institutions are all looking for that customer-centric view where they can consolidate transaction data with the ultimate goal of up-sell and cross-sell opportunities," she says. "Of course, every company is on a different plane on just how to get there. "We expect North American banks--particularly those in the U.S.--to be subject to more economic strains and competitive pressures in 2004 and beyond," Gillespie says. She notes that the industry continues to be bombarded with new compliance obligations in the U.S. (the Gramm-Leach-Bliley Act of 1999, the USA Patriot Act, and the Sarbanes-Oxley Act), with the potential for Basel II compliance, at least for large-money banks, to name a few. "Banks that are more aggressive in adopting risk management and compliance software while attempting to become more efficient with straight-through processing, technology-advanced infrastructure, and core processing solutions will be better positioned for the upcoming challenges," Gillespie says. According to Gillespie, bank CIOs should increase their overall IT investments in 2003 and 2004 in areas that can help improve productivity and efficiency for employees, enforce compliance, and mitigate risk. Banks seeking to use new technologies for competitive advantage should invest in portals, Web services, Linux, and J2EE on the mainframe. Banks looking to reduce risk should invest in artificial intelligence. To improve productivity for employees, they should invest in employee-facing portals and advanced human resource applications for human capital management.